When times are hard or when we first start out in business as entrepreneurs, we tend to take on every business or project that seems viable and accept whatever fee is on offer in order to gain exposure and generate some income. While it’s acceptable to take low-paying contracts or work pro-bono from time to time, be mindful that this does not become the norm as it will eventually hurt your brand, yourbusiness, and your bottom line.

Imagine you have a client that requests that you take on a project at a fraction of your fee as a favour. You accept the project, the rate, and deliver an exceptional service, hoping this will lead to more business or client referrals in future. Over time this client continues to make unreasonable demands on your time without paying you what you are worth. Moreover, it takes you weeks or months to receive payment for the services rendered. This scenario is unprofitable and emotionally draining and can take up so much of your time and energy that you can’t even focus on finding new clients.

There comes a time when you have to reconsider the merits of keeping on such a client, because low quality clients tend to lead to more low quality projects. By classifying clients into categories and regularly assessing your client base, you are able to effectively use your time and resources in order to serve the ideal clients better and get rid of the bad ones.

Always remember the 80/20 rule:

20% or a small number of your existing clients bring at least 80% or the majority of your business and account for 80% of the profits.

So, how do you classify clients or customers?

ABC is the commonly used classification method:

A - Represents a client who basically treats you like a partner; this is the ideal client or customer as it brings major profits into your business.

B - Is a great client who is also highly profitable to your business and is worth keeping

C - Signifies the majority of your clients who are reasonably profitable, steady, easy to work with and who pay on time.

It is important to have a good spread of clients in the three categories so you can sustain your cash flow if you have to wait a little longer for some payments. If a client hardly brings in business, never pays on time, drains your energy by being difficult and takes up your time, you may want to terminate the relationship because it is costly.

It’s critical to know your worth and the value of your expertise as an entrepreneur; in fact how you spend your time and your sanity should come first.

Remember, when you settle for less, you end up receiving less than you settled for.

Thanks for visiting LoA. This community is all about telling the inspirational stories of some of Africa's most successful and innovative women entrepreneurs; engaging in discussions about issues that matter to women entrepreneurs; celebrating success; and showcasing some of the incredible companies, products and services on offer around the continent from women-owned businesses - Melanie Hawken, founder and editor-in-chief

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